Everything you need to know about buying off plan – Part 3: From deposit to settlement and beyond
This is the final instalment of our 3 part series on buying property off the plan. In the last 2 instalments we covered the major benefits of buying off plan and some of the strategies you can use to find the right property. Today we’ll focus on the actual purchasing experience.
To make things easier we’ve broken the purchasing experience down into 4 different sections: the exchange process, the construction period, the settlement process and the post-settlement period.
Paying your deposit and signing the contract.
Once you’ve found a development you love and have decided on the floor plan, a contract will be drawn up and sent to your solicitor. Your contract will outline exactly what you are buying, what your obligations are regarding the purchase and payment, as well as the developer’s responsibilities and obligations to you. Your solicitor will go through the contract with you to ensure you understand it fully. Make sure you have all your questions answered before you sign.
Once you’ve signed the contract, the developer will sign an identical contract and you will exchange them. This will be arranged through your solicitor. After the contracts you need to pay a deposit. A deposit of 10% of the total purchase price is legally required, however often there special conditions available.
Under certain circumstances a developer may elect to accept a partial deposit of 5% or they may be willing to accept a $1000 down payment with the remained of the deposit to be paid within a certain time frame – giving you additional time to save the money needed.
Typically, your deposit is paid into a trust account where it will be held until the building is completed and ready for settlement. However, you can also use deposit bonds and bank guarantees to make your deposit.
What you will experience while your home is being constructed.
After you’ve exchanged contracts and paid your deposit, you will have extra time to save more money to put towards your new home while you wait for it to be built.
The length of the construction period can vary from development to development. It may take a while for construction to commence while the developers work towards obtaining the necessary approvals, hire contractors and get everything in place before they begin.
Ideally you should receive updates from your sales agent as key milestones are reached in the construction process. These milestones can include when the underground car park has been excavated, when the first level of the building has been built, when the top of the building has been reached and when the first fit-out of one of the apartments is completed.
Due to Workplace Health and Safety standards, construction sites are inaccessible and opportunities to inspect the development during construction are rare, but it is possible you be might invited by your sales agent to visit the site.
While the building is under construction you may also be given the option to purchase window treatment packages which will be installed at the point of completion, saving you the trouble of having to wait until you move in to find and install them on your own.
As the construction period draws to a close, you will be given an estimated date of settlement. It’s a good idea to get your finance sorted at this stage, as it will give you time to ensure everything is in order and ready to go.
Settlement and taking possession of your property.
Once the building is completed, you will be contacted to arrange a pre-settlement inspection. It’s a good idea to bring your contract with you to the inspection. Go through every item on your inclusions list, that way you can check to make sure everything it there. Make a list of anything that is missing, or damaged so the builder can have it fixed before settlement.
After your pre-settlement inspection, the units will receive a certificate of occupancy and the building itself will be signed off as meeting requirements. When the final certificates have been issued, the development will be lodged for registration under the Units Act with the Office of Regulatory Services. They will inspect the development to ensure that it meets the requirements of the Unit Titles Act in the ACT (or equivalent legislation in other states of territories). They will check that the building was constructed according to the approved plans, that it complies with building regulations and that it meets habitation standards. How long this takes can vary, and it is solely in the hands of the unit titles office. It could only take a few days or it could take a number of weeks.
You contract will contain the specific settlement details, but generally it will call for settlement to be within 2 weeks of the registration of the unit’s plan. You will need to have unconditional approval from your lender for the total purchase price of your new property (minus your initial deposit and any additional money you have saved). Once the money has been transferred, the contract is settled, and the property is yours to enjoy!
After settlement, you generally have a 90 day maintenance period in which you can report any defects such as leaks or cupboard doors not closing properly. The builder will then fix this for your free of charge. Appliances are covered by a manufacturer’s warranty.
A few weeks after settlement the first Annual General Meeting of the body corporate will be announced. We highly recommend you attend this meeting. This will give you a chance to help decide on how the development is managed.
At this meeting an Executive Committee will be elected. They will appoint (or confirm the appointment) of a strata manager who will help them to look after the needs of the development. For larger developments, they may also appoint a facility or building manager who will take care of the day to day needs of the building and grounds.
If you’d like to discuss purchasing an off plan property, get in touch with one of our offices.
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